The rupee recovered a tad to end higher at 64.01 against the dollar as domestic equity markets recovered with healthy capital flows amid easing of selling pressure.
Foreign investors exited heavily on Tuesday with the domestic markets witnessing sharp fall leading the rupee to close at a 20-month low of 64.17.
On Wednesday, the Indian currency opened a tad softer at 64.19 against the dollar. It declined to 64.21 and later recovered to 63.93 as equity markets surged by over 350 points.
However, experts feel the reasons for a further downfall in the rupee is increasing as pressure on selling in India are mounting amid rising oil costs, uncertainty over tax policy, growth and other government’s steps.
In addition, the RBI’s limited intervention even as the rupee slid on Tuesday, could send signal the acceptance of the rupee’s valuation at lower levels, reports suggest.
Local and global challenges are rising against the INR (Indian Rupee), said Paul Mackel, Head of Emerging Markets FX Research of HSBC Global research in a report.
Last month, the Indian currency lost 1.5 per cent against the dollar.
”While the INR remains supported by some positive features, they are not enough to prevent it from weakening against the USD. Dollar-Rupee should trend higher - we revise our year-end forecast to 66 from 63.50,” the report added.
Call rates move up; Bond ends flat
The interbank call money rate, the rate at which banks borrow short-term funds from one another, ended at 7 per cent from the previous close of 6.60 per cent on Tuesday. During the day it moved in the range of 6.25 and 7.80 per cent.
The price and yield on the benchmark 8.40 per cent government security maturing in 2024, closed lower at Rs 102.83 from the previous close of Rs 102.88. The yield of the bond ended almost flat at 7.95 per cent, respectively.
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